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The Shifts In Lead‐Lag Properties Of The U.S. Business Cycle

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  • Joshua Brault
  • Hashmat Khan

Abstract

We document shifts in the lead‐lag properties of the U.S. business cycle since the mid‐1980s. Specifically, (1) the well‐known inverted leading indicator property of real interest rates has completely vanished; (2) labor productivity switched from positively leading to negatively lagging output and labor inputs over the cycle; and (3) the unemployment rate shifted from lagging productivity negatively to leading positively. Many contemporary business cycle models produce counterfactual cross‐correlations revealing that popular frictions and shocks provide an incomplete account of business cycle comovement. Determining the underlying sources of these shifts in the lead‐lag properties and their consequences for macroeconomic forecasts is therefore a promising direction for future research. (JEL E24, E32, E43)

Suggested Citation

  • Joshua Brault & Hashmat Khan, 2020. "The Shifts In Lead‐Lag Properties Of The U.S. Business Cycle," Economic Inquiry, Western Economic Association International, vol. 58(1), pages 319-334, January.
  • Handle: RePEc:bla:ecinqu:v:58:y:2020:i:1:p:319-334
    DOI: 10.1111/ecin.12841
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    Cited by:

    1. Jordi Galí & Thijs van Rens, 2008. "The vanishing procyclicality of labor productivity," Economics Working Papers 1230, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2010.
    2. Hashmat Khan & Jean-François Rouillard & Santosh Upadhayaya, 2020. "Consumer Confidence and Household Investment," Cahiers de recherche 20-15, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
    3. Hashmat Khan & Jean-François Rouillard & Santosh Upadhayaya, 2019. "Consumer Confidence and Household Investment," Carleton Economic Papers 19-06, Carleton University, Department of Economics, revised 28 Oct 2020.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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